Merger fails, but D.Boerse CEO says allies a must

By IBT Staff Reporter On 02/05/12 AT 7:40 PM

Deutsche Boerse does not believe it can survive in the long term without a new partner despite the collapse of its proposed $7.4 billion merger with NYSE Euronext , its chief executive told a German newspaper.

We need to fight even harder and pay attention to customers, innovation, market penetration and costs. And we will and must examine further alliances, CEO Reto Francioni told the Financial Times Deutschland in comments to be published in the Monday edition.

Francioni, who said he has no plans to step down or surrender his bonus for 2011, attacked the European Commission's decision to block the merger and said the exchange operator would consider taking Brussels to court over it.

It made absolutely no sense, he said, for the Commission to claim the combined entity would have a dominant position in the derivatives market because Brussels ignored the huge amount of over-the-counter trading conducted directly among banks.

On Thursday, Boerse and NYSE terminated their merger plans after the European Commission blocked the deal to prevent handing the combined group a near monopoly.

The company will now focus on a handful of issues to spur internal growth, Francioni said.

We will vigorously expand our positions with a concentration on derivative clearing, risk and collateral management, he told the paper. Furthermore we will accelerate our internationalisation.

Over the weekend a Boerse supervisory board member told a newspaper that Francioni should step down following the collapse of the merger with NYSE.

The question needs to be asked whether there have to be consequences for management, Johannes Witt, a board member representing the interests of labour, told German weekly Euro am Sonntag in comments published on Saturday. Can someone who wanted to change the status quo by finding a partner only to see that collapse still lead this company into the future?

Francioni's term ends after December 2013, and contract extensions for CEOs in Germany are often agreed about a year in advance.

Boerse's labour leaders had undermined its campaign to convince German regulators a deal would strengthen Frankfurt's role as a financial centre when they urged shareholders to reject the deal, fearing key responsibilities would be moved to New York.

Separately, Deutsche Bank's German retail asset management unit, DWS, called for a fresh start at the exchange operator in comments published by business weekly WirtschaftsWoche on Saturday.

The merger tied up management capacity for more than a year. In the past couple of years, Boerse has stagnated, and now more dynamism needs to return, said Henning Gebhardt, head of European equities at DWS.

Now and then there needs to be a fresh start - whatever form that might take. ... Francioni, of all people, does not come out of this without a scratch, Gebhardt told the magazine.

The fund manager said he was also unsatisfied with Boerse's development in overseas markets.

Asia is where it's at. That's where to go for a piece of the action. I'm starting to suspect that the Boerse is not always the preferred partner there, he said. The company must listen more closely to what its customers want, since they are looking for alternatives and are migrating to new platforms like Chi-X or Bats.

Boerse Chairman Manfred Gentz has rejected the idea of any immediate consequences for the Boerse due to the collapse of the NYSE merger, calling instead for calm and continuity.

There is no cause for fundamental changes in the strategy, structure or management, he wrote.